Brent Crude Oil at $110 on US Recovery, Iran Jitters

Friday, 15 Mar 2013 | 3:28 PM ETReuters

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Brent crude rose to near $110 per barrel on Friday as strong U.S. economic data fuelled prospects of increased demand in the world's top oil consumer, while concerns over supply from the Middle East added support.

U.S. industrial production strengthened more than expected in February on a rebound in manufacturing.

"The positive development in industrial production shows that U.S. economic prospects are looking up... and of course the United States is a big export market for China," said Harry Tchilinguirian, oil analyst at BNP Paribas in London.

This followed on from strong U.S. jobs data the previous day, which also helped persuade investors that demand for energy would be robust.

Oil prices were boosted on Thursday by President Barack Obama's comments that military force remained an option if sanctions and diplomacy failed to curb Iran's nuclear ambitions.

Brent crude futures the primary global benchmark, was up more than $1 to $110.01 per barrel, gaining for a second day after snapping four straight days of losses.

The April contract, which expired on Thursday, settled 90 cents higher, but the benchmark was poised for its fourth weekly decline in five weeks.

U.S. light, sweet crude gained 47 cents to $93.50 per barrel, and was set to post its second straight week of gains.

"In the oil market I think there is a broad book-squaring move afoot," said Tim Evans of Citi Futures in New York. "Traders who in recent weeks benefited from going short oil may now be taking profits and covering their positions."

Oil was also supported by weakness in the U.S. dollar, which made dollar-denominated crude more affordable to holders of other currencies. The dollar fell on Friday on investor concern that recent, strong U.S. economic data could prompt an early retreat from monetary easing by the Federal Reserve.

Standoff

Iran was still more than a year away from developing a nuclear weapon, Obama said in an interview with Israeli television broadcast on Thursday, six days before his visit to Israel.

Obama appeared to send a message to Prime Minister Benjamin Netanyahu on the need for patience with Washington's Iran strategy while also showing U.S. resolve to confront Tehran if necessary.

Worries the standoff between the West and Iran over the Islamic Republic's controversial nuclear programme will escalate and disrupt oil supplies have kept Brent above $100 a barrel through most of 2012 and this year despite weak demand.

High U.S. Gasoline Prices

U.S. consumer prices registered their biggest increase in nearly four years as the cost of gasoline rose, data released on Friday by the Labor Department showed. According to data compiled by Gasbuddy.com, which tracks average U.S. retail fuel prices, the price of a gallon of gasoline at U.S. pumps has risen more than 40 cents this year to $3.67.

Four-week average U.S. gasoline demand is up 1.1 percent from year-ago levels, government data showed earlier this week. U.S. gasoline futures for April rose 0.5 percent to $3.157 per gallon on Friday.

"We don't need to be in panic mode. U.S. refiners probably can meet the challenge of producing ample supply for the peak summer driving season," Evans said.

U.S. consumer sentiment tumbled to its lowest since December 2011 in early March, hit by dissatisfaction with government economic policies and as fewer Americans expected to see improvements in growth or the labor market, a survey showed.